Statement of Administration Policy: H.R. 27 - Federal Savings and Loan Insurance Corporation Recapitalization Act of 1987

FINAL: TRANSMITTED TO HILL 5/14/87

(Senate)
(St Germain (D) RI)

The administration urges the immediate enactment of a bill to recapitalize FSLIC with funds from the private capital markets at $15 billion ovet five years. The administration's full self-help plan would: (1) result in a responsible level of funding that will allow FSLIC to protect depositors; and (2) avoid the risk of a budget-busting bailout of FSLIC. Insufficient funding now will increase the ultimate cost of dealing with insolvent savings and loan institutions.

If a bill were presented to the President (1) without the requested resources for FSLIC, or (2) with the highly objectionable provisions outlined below, the President's senior advisers would recommend the bill's disapproval.

The following objectionable provisions are extraneous or unduly restrictive and do nothing to safeguard the savings of FSLIC- insured deposits:

• Senate provisions to close the non-bank bank loophole;
• Senate provisions to prohibit banking institutions from offering new products and services;
• Senate provisions to exempt the Federal financial regulatory agencies from Presidential oversight through the apportionment process; and
• House provisions to impose rigid statutory limitations on the ability of the regulators to supervise and resolve troubled thrift institutions, rather than permitting flexible regulatory discretion, where appropriate, to forbear with well-managed institutions that can demonstrate reasonable prospects to work out their problems.

The administration strongly supports the Garn amendment to delete Titles I (Financial Institutions Competitive Equality) and II (Moratorium on Certain Non-banking Activities) from S. 790, as passed by the Senate, and also supports all efforts on the Senate floor to eliminate the objectionable provisions listed above.